Tax Increases Likely In Ireland's 'Harshest' Budget

by Amanda Banks, Tax-News.com, London

14 October 2008

Irish citizens are bracing themselves for bad news in Finance Minister Brian Lenihan's maiden budget announcement, which is likely to include a number of tax increases in order to fill a gaping hole in the government's finances.

According to the country's Prime Minister, Brian Cowen, the tax increases will be a necessary measure to bolster the budget during the current economic difficulties, and are likely to go ahead, despite the strong objection that is expected from voters.

Among the possible proposals - which are being introduced in light of the EUR9bn exchequer deficit - could be a 2% increase in the income tax or health levy. High earners may also see the current 47% personal allowance for regular pension contributions reduced. A customary increase in taxes on cigarettes and alcohol is also expected.

By implementing these combined measures, the government is expected to increase revenues by at least EUR500m.

However, economic experts have warned the government against raising taxes, suggesting that such measures will merely hit the average taxpayer even harder in the pocket at a time when they are also grappling with rising inflation.

In addition to the tax increases, the government's public spending rate will drop dramatically, with speculation that the free medical cards issued to the elderly might be reviewed.

The budget announcement, which was brought forward from December after the government announced problems with its accounts, is due to take place on Tuesday.

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